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Shares in Fisher & Paykel Appliances plunged 11.5 per cent yesterday after it warned first half profit could halve as the whiteware maker struggles with high raw material prices, a slowing market and costs associated with its factory relocations.
Its shares shed 24c to close at $1.85 -
the stock's biggest one-day fall since February 2005.
Chief executive John Bongard told shareholders at the company's annual meeting in Auckland yesterday that its normalised first-half after-tax result was expected to be approximately 50 per cent down on the previous corresponding period.
He said relocation costs would see the company post a tax reported first half loss of between $7 and $10 million, but the moves to increase overseas manufacturing would improve the company's long-term outlook.
The whiteware maker announced in April that it was closing manufacturing operations in Dunedin, Brisbane and California over the next 12 to 18 months - resulting in more than 1000 job losses - and moving them to a combination of existing sites in Thailand and Italy, and a new fridge factory in Mexico.
At the time, the company said the move was expected to reap annual savings of $50 million - the full benefits of which was to be felt within two years.
Bongard told shareholders he was confident that the forecast savings would be fully realised.
"The lower manufacturing costs are now starting to flow through from the Thailand factory. These actual and forecasted savings are exceeding initial expectations."
The second half would see the company reap full gains from Thailand and preliminary gains from Mexico, he said.
Fisher & Paykel expects improvement in the second half will see earnings come in at the low end of analysts' current projections. That, according to Reuters' estimates, could mean a profit of about $19 million - a 65 per cent drop on the $54.2 million posted for the year ending March 2008.
The manufacturer has also been hit hard by increased costs for raw materials such as steel. Markets were also slowing.
"We are progressively reducing finished inventory levels, which has resulted in lower production through our factories and impacted our economies of scale in the short term."
Interest costs were also up because of increased funding requirements as a result of the factory relocations, he said.
